Tuesday, August 28, 2012

With face blackened, UPA tries whitewash

(First published in The Pioneer dated August 22, 2012)

RAJESH SINGH

The Congress-led UPA Government has developed a visceral dislike for
the terminology, ‘presumptive or notion loss’ to the exchequer, after
the massive 2G Spectrum scam broke out in the public domain. So, out of
respect for the regime, let us for the moment keep aside the figure of
Rs 1.86 lakh crore that the Comptroller and Auditor-General has computed
as the notional loss to the public coffer because the Government
distributed a number of coal blocks to private players without going in
for competitive bidding. That may be an approximately true enough figure
or it may not. Instead of thus getting into an argument over this
number, let us look at the Government’s justification for not having
opted for the auction route.
The first defence of the UPA regime — and that of the Congress in
particular, since the Prime Minister is directly under attack as he held
the coal portfolio during the period when the Government decided to
distribute the blocks like one-time feudal lords gifted away property to
their favourites — is that the auction route would have taken a
tortuously long time to materialise because auction would have needed
changes in the Mines and Minerals (Development and Regulation) Act.
Since the Government was keen to enhance coal production at the
earliest, it decided on the direct allocation, goes the argument. This
is a flimsy explanation to cover up for the fact that the Government was
pre-disposed to the non-auction route, and that is why it dragged its
feet on bringing about the changes in the relevant provisions of the
MMDR Act. A look at the sequence of events will expose the regime’s lie.
But first, let’s see how the facts played out.
Within six weeks of coming to power in May 2004, the UPA Government
headed by Prime Minister Manmohan Singh made public the concept of
competitive bidding for captive coal blocks. The Government went to
great lengths to publicise its intent as part of its ‘determination’ to
revamp and professionalise the coal sector. Two weeks after the
declaration of this noble intent, the Coal Secretary prepared a
comprehensive note on the subject.
The impression that gained ground was that the competitive bidding
process would be approved. But, suddenly and mysteriously, a note
materialised from the Prime Minister’s Office that detailed the
‘disadvantages’ of allotting coal blocks through competitive bidding.
The brave Coal Secretary (unusual for a bureaucrat) rubbished the
note and drew attention to some ‘pressures’ that were being applied on
the steering committee formed to study the issue. But his courage came
to naught. The Union Ministry of Coal had made up its mind against
auctioning the blocks on the pretext that competitive bidding would need
changes in the law, and that such changes would be a long-drawn
process. By the end of 2004 and early 2005, it had become clear that
coal blocks would be awarded directly by a panel constituted by the
Government and that competitive bidding would be considered on a
prospective basis at a later date.
Having arrived at such a conclusion, the Government showed no hurry
in moving to amend the MMDR Act. Had the UPA sincerely worked from the
start of its first innings in office to bring about change in the
legislation, it had a good chance of success. It took an entire two
years for the Government to move on the issue of amendments. It was only
in March 2006 that the Prime Minister’s Office, after having virtually
cleared the route for direct and less than transparent allocation of
coal blocks to a bunch of private players, decided to put in place the
process of competitive bidding. Had the regime been serious, in the two
year period (2004-06), it could have pushed through the needed
amendments. But it used up the time to promote allocation of the
valuable natural resource without competitive bidding. It began bolting
the stable after the horses had escaped.
Even so, it was another two years before the Government brought to
Parliament the Mines and Minerals (Development and Regulation)
(Amendment) Bill. It was only towards the latter half of 2010 that the
Bill became law. In other words, it took two years from the time
amendments were proposed to their becoming law. It is clear from these
facts that the Congress-led regime was less than enthusiastic for
whatever reason in selling off the coal blocks to the highest bidder.
The Government can now argue that the delay in getting the amendments
passed by Parliament was because it was busy ironing out differences
among various stakeholders. But that does not sound convincing. The fact
is that even today industry is unhappy with the amendments. The
Federation of Indian Chambers of Commerce and Industry has, for
instance, said the new provisions would make mining of coal and minerals
“unattractive”. This, it claimed, is because of the rule that coal
mining firms have to contribute 26 per cent of their profits to a
development fund. FICCI also said that the tax burden on the coal sector
as a result of the changes in law could rise to 61 per cent.
The other defence put forth by the Government has been that the
allocation of blocks without an auction had been taken in the larger
national interest. We are yet to be told what that ‘larger national
interest’ was that has been adequately served. But the CAG offers us a
glimpse of how the ‘larger interest’ has not been served. Three brief
quotes from its report will tell the story:
1. The process of bringing in transparency and objectivity in the
allocation process of coal blocks got delayed at various stages and the
same is yet to materialise even after a lapse of seven years.
2. Out of 28 producing blocks as on June 30, 2011, in case of 10 blocks, there was time overrun ranging from one to 10 years.
3. The Coal Controller’s Organisation did not conduct any physical
inspection of allocated coal blocks to ascertain the actual progress as
per the MMDR Act, 1957.
To top it all, even the avowed purpose of the Government in directly
allotting coal blocks to private parties without competitive bidding,
does not seem to have been achieved. There is no indication that the
UPA’s action has boosted coal production in any way, since many of the
blocks are reporting little output. In fact, the CAG notes that the
“de-reservation of Coal India Limited blocks did not yield desired
results.”
Neither the Comptroller and Auditor-General of India nor the people
in general are opposed to private players having a major role in the
development of the coal sector. Indeed, without the wholesome
participation of the private players, the coal industry has no future.
As the CAG notes, “Captive coal mining is a mechanism envisaged to
encourage private sector participation in coal mining.” But such
participation must happen in an environment of transparency and without
loss to the public exchequer.

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About Me

Born in Allahabad district of Uttar Pradesh.
Brought up in Coimbatore, Cochin and Goa.
Lived in Goa for 36 years: from 1968-2004.
Worked in various positions at the Goa-based English dailies: The Navhind Times and OHerald.
Was Editor of a Goa-based TV news channel Goa 365.
Served as Media Advisor to the Goa Chief in 2002-03.
Served as Director of Information and Publicity, Government of Goa (2002-03).
Now, based in Delhi and working for The Pioneer as Senior Editor